The discussion around sustainable business has circled closely around its benefits for the planet and society but for many, there has been a fear that publicly embracing sustainable values cuts the financial means short, scares away the potential new investors, and upsets the existing shareholders.
The data presented by various organizations tells a very different story.
Sustainable investing is in ascension
Already in 2019, 80% of asset owners said that they actively integrated sustainable investing and in 2020, sustainable funds reached record levels with over $51 billion in new investments, more than doubling the previous record from 2019. The most common approach to sustainable investing is environmental, social and governance (ESG) integration.
While the main reason to invest in sustainable funds are reputational benefits, the impact on the world and improved financial performance are not far behind on the list. The importance of environmental impact can also be seen in how climate change is the top sustainability theme the investors seek to address, followed by other environmental themes, such as water solutions, plastic waste management, and circular economy. While the environmental themes rank the highest, social impact, such as gender diversity and education, are following right behind them.
The importance of sustainability can be seen in how 57% of institutional investors envision a time when they will limit allocations solely to investment managers with a formal sustainable investing approach.
People demand focusing on sustainability
As the main reason to invest in sustainability are reputational benefits, the general opinion of people cannot be overlooked. When the knowledge in sustainability increases, the pressure set by asset owners will undoubtedly increase with it.
Research shows that 63% of people already want businesses to drive social and environmental change in the absence of government action, while 76% expect companies to take action against climate change. To back the statement up, research says that 85% investors already see climate change as the greatest long-term threat, and many have already started to move their investments to respond to the crisis. 70% of them say that they would actively avoid putting money into business that has a negative effect on the environment.
As a survey by Deloitte UK shows that despite the global pandemic, the public interest towards sustainability remains high. Based on this, the trend in sustainable investing will probably not decrease any time soon.
As the investors have already done the shift towards sustainability, the other end of the line, businesses, need to follow. Now, at last, sustainable and value-based business should no longer be considered a risky game but the game of the future.
